WASHINGTON, D.C.- Turmoil in the housing and stock markets now threatens the retirement security of tens of millions of baby boomers who looked to their houses and investments as sources of retirement wealth. A new report from the Center for Economic and Policy Research (CEPR) shows that due to the collapse of the housing bubble, the vast majority of near retirees have accumulated little or no wealth. This means that they will be almost completely reliant on Social Security and Medicare to support them in their retirement years.

“The collapse of the housing bubble, which led to the current recession, has already destroyed almost $6 trillion dollars in housing wealth for homeowners,” said report co-author Dean Baker, who will be testifying today before the Senate Special Committee on Aging. “This reality is compounded by the recent collapse of the stock market. The result is that many baby boomers will only have Social Security and Medicare to rely on in their retirement.

The study, “The Wealth of the Baby Boom Cohorts After the Collapse of the Housing Bubble,” analyzed the wealth holdings of families headed by people ages 45 to 54 and 55 to 64 in 2004 and projected their wealth in 2009. The findings are presented by income quintile under three scenarios: house prices remain at November 2008 levels—the latest data available—, house prices fall by 5 percent from November levels, or house prices fall by 15 percent. In all three scenarios, the vast majority of these families will lose a substantial portion of their net wealth in 2009.

The report projects that in 2009, the median household in the 45 to 54 age cohort saw its net worth drop by more than 45 percent since 2004, to just over $80,000 (including home equity). For early baby boomers, those between the ages of 55 and 64, the losses were not quite as steep but still came to 38 percent of net wealth, with the median wealth falling to $140,000, approximately 80 percent of the price of the median home. Nearly 30 percent of late baby boomers will need to bring cash to a closing to cover their outstanding mortgage and transactions costs.

This analysis should reaffirm the need to protect programs such as Social Security and Medicare. Baker commented, “now that tens of millions of families have just seen much of their wealth disappear, it is especially important to pursue policies that ensure retirement security for those on the brink of retirement.”

In analyzing wealth holdings for these families, the authors used data from the Federal Reserve Board’s 2004 Survey of Consumer Finance. The authors also used the S&P 500 and the Case-Shiller 20-city Composite Index to adjust for equity values and home price changes between 2004 and 2009.